France, Germany near deal on car emissions, Britain 'Made in EU' status

BRUSSELS, Oct 15 (Reuters) - France and Germany are nearing a deal on cars that would water down EU-wide CO2 emission targets for 2035 and open the door for Britain to be treated as a trusted partner under the EU's "Made in EU" rules, diplomats said. 

The European Commission proposed last year that CO2 emissions from cars should drop by 90% from 2021 levels in 2035, but said automakers would have to close the gap to 100% by using low-carbon steel and alternative fuels.

Under the Franco-German plan, which still needs to be confirmed, the target would be set at 90% without the need for any further compensatory measures. The softened target is broadly in line with the wishes of German carmakers.

The joint plan also addresses an EU proposal that introduces local-content and low-carbon requirements for products bought through public procurement, public auctions or via subsidy schemes.

France has been pushing for these products to be limited to those manufactured in the European Union, while other EU members, including Germany, believe other countries, including those closely linked in automotive supply chains and free trade agreement partners, should be included.

The provisional Franco-German plan says that for the automotive sector "Made in Europe" should cover the EU's 27 countries and other European partners that were part of the EU internal market on January 1, 2020. 

That would include Britain, which left the EU single market at the end of 2020.

However, the joint plan does say that this inclusion should be subject to an agreement on full reciprocity, along with "dynamic alignment with EU conditions for investment from third countries and with EU trade protection measures".

That could mean Britain having to adopt the measures the EU has taken to limit imports of Chinese-built hybrid and battery electric vehicles.

In Germany, the new CO2 reduction target could prove a challenge as the environment minister of the Social Democrats has suggested that the target could be cut to 95%, with a further 5-percentage-point reduction offset via low-carbon steel.

Even with a Franco-German deal, the two countries still would need to convince other EU members and the European Parliament for their plans to enter into force.

(Reporting by Philip Blenkinsop and Michel Rose; Editing by Cynthia Osterman)